A. NATIONAL GUARANTEE FOR WAR RISKS OF SHIPPING. T HE discussion
of the Declaration of London has re- vealed deep and widespread uncertainty as to the treatment of contraband in war. We do not desire now to go again into the general problem of the Declaration itself. Its supporters, of course, believe that it puts no powers in the hands of the enemy which he did not possess before. We dissent from that view, and still hope that the Declara- tion may not be ratified. Granted that the International Prize Court would give judgments as favourable to our national interests as is assumed by the supporters of the Declaration, the fact remains that these judgments could not be delivered till long after the capture of the ships containing alleged contraband ; and meanwhile the British people would suffer from the effects of capture just as though the new International Court did not exist. We would draw the attention of our readers to a very able letter on the Declaration from Mr. Atherley-Jones which we print elsewhere. As a supporter of the Government he has no temperamental prejudice against the Declara- tion, and has arrived at his conclusions solely on a legal and historical study of the question on its merits. We shall not, however, follow his arguments, but will turn at once to the particular point of the war risks of shipping and the desirability of providing against them. The issue whether the Declaration of London is wise or unwise will have to be proved by events. It can be ultimately proved only by a war. Now, if Great Britain should be forced into war, it is absolutely certain that there would be profound uneasiness among our shipowners as to the safety of ships and cargoes. It might turn out to be a misplaced uneasiness. It might be that if we went to war Sir George Clarke's belief that under modern conditions it is easier to protect commerce than formerly would be proved true. It might be that the losses of British shipping would be less than Admiral Mahan estimates them to have been during the great French wars—viz., 21 per cent. It might even be that if our Navy, on which everything depends, re- mained easily mistress of the seas, our volume of trade would increase during war as it did in the Seven Years' War and in Nelson's time. But, on the other hand, it is just as likely that wireless telegraphy, which puts a thousand eyes in the head of every sea captain, would greatly aid the work of holding up and destroying com- merce. But if the war opened with only half-a-dozen sensational captures of British ships or of neutral ships carrying alleged contraband, the anxiety of ship- owners would fester into panic. It would matter nothing that such captures might not be repeated. The shipping market would be upset, insurance pre- miums would rise, if not to panic rates, at all events to rates that would do grave injury to the quantity of our overseas food supply. What we have to anticipate and to provide against by forethought is not acts of war, which are necessarily uncertain, but against a psychological state among shipowners., Even temporary -panic might cause prices to rise to a point which would inflict great priva- tions on the British people and impair our efficiency in conductis4 the war. The Navy alone can save us in the long run from the destruction of our commerce, but a national guarantee for the war risks of shipping could save us from wholly unnecessary and calamitous disorders of the market.
The war risks of shipping were examined by a Committee which issued its report in 1908, and the Committee felt unable to recommend that any guarantee should be offered by the State in order to allay panic and enable our com- merce to be carried on exactly as though war did not exist. We wish now to direct attention again to this matter, because the Declaration of London has imported a new element of uncertainty into the shipping trade. A great number of shipowners mistrust the Declaration. That is, in itself, an ominous sign, for even if their fears turned out to be unfounded, these fears would certainly be reflected in the state of the market in the early part of a war. Ships might be laid up or might be transferred to foreign flags. If a proportion of our shipping were withdrawn from or driven off the seas, our carrying trade might never recover its former prosperity, just as the American shipping industry never wholly recovered from the injuries of the Civil War. In expressing an opinion that if the Declara- tion of London were ratified an urgent occasion would have arisen for a national guarantee for the war risks of shipping, we may quote the reservation which Sir Charles Ottley—one of the Naval delegates who helped to draft the Declaration of London — appended to the report of the Committee in 1908. " The only point on which I wish to enter a reservation," he wrote, " is this : I think it would be very regrettable if our inability to recommend State action to-day should come to be regarded as definitive proof of the uselessness and impracticability under any circumstances in the future of any scheme of national guarantee In any case our Committee will not have laboured in vain if its report serves to attract public attention to a matter which is of some moment from the point of view of national interests." But it was not only Sir Charles Ottley who did not wish the non possumus of the Committee to be of permanent application. Throughout the whole inauiry it was " assumed " by the Committee that " the laws of maritime warfare, including the laws regulating capture, contraband of war, the right of search, &c., would remain unchanged. Some of the witnesses evidently held strong views as to the necessity for a revision (whether in the direction of a reversal or an extension) of the principles of the Declaration of Paris. But this subject was outside the scope of our reference."
In the light of these words we feel strongly that the time has come to urge again the desirability of a national guarantee for war risks. The Declaration of London pro- poses to extend the principles of the Declaration of Paris, and the prospect is viewed with deep apprehension by many of our leading shipowners.
What form ought a national guarantee to take ? The scheme which we should like to recommend was described in substance by Mr. St. Loe Strachey in evidence given before the Committee on a National Guarantee for the War Risks of Shipping. In a preliminary Memorandum laid before the Committee he submitted the following points:— "(1) That it is of vital importance that during war, as during peace, the freest possible access and exit shall be secured to those who desire to import or export food and other merchandise. " (2) That it is within the power of the Government to assimilate the conditions under which commerce is carried on during war to those which prevail in peace:—
(a) By maintaining command of the sea. (b) By undertaking to make good any losses which owners of ships and cargoes may sustain by running their ships and embarking their cargoes as freely during war as in peace. " (3) That it would repay the Government to guarantee immunity from pecuniary loss, because it is the fear of destruction, rather than the actual destruction, of ships and cargoes that has to be dreaded from the public point of view. " (4) That heavy rates of war insurance on British shipping would result from this fear, and would severely handicap British trade in neutral markets.
" (5) That to prevent fraud the State should only undertake war risks where the owners had insured against ordinary sea risks, and only for the amount insured against sea risks. " (e) That in case of dispute the policy should be adjudicated upon exactly as it would be in peace time between owners and insurers, the Government being in the position of the defendants."
In criticism of these principles it has been said that a • scheme founded on them would lead to fraud, but it seems to us that, putting the onus of proof of loss on the ship- owners or merchants would secure the Government against fraud as much as Lloyd's is secured to-day. Fraud is some- times attempted and sometimes succeeds. but it does not make the business of Lloyd's ineffective for its purpose, or a failure in a business sense. When the national interests are at stake we do not believe in surrendering to a morbid fear that the shipowners will get too much out of the bargain. Again, it is said that masters who knew their ships were safely insured would continually run avoidable risks. We do not find, however, that servants are careless in taking precautions against fire in houses which are fully insured. No man likes being captured, just as no man likes being burned, even though being captured is not so bad as being burned. Moreover, if the risks to shipping are, as the Committee argued, not serious, then the payments which the Govern- ment would be required to make would not be great either. The objection answers itself. All we ask is that com- mercial panic should be made virtually impossible. The State would say, in effect, to shipowners and merchants : "You can go ahead in war just as in peace. The Govern- ment is behind you—first with the Navy, and secondly by indemnifying you against losses."
We want all shippers and traders to feel that, for their purposes, war risks have ceased to exist. We can give ' them this feeling by in effect endorsing every ordinary - policy of marine insurance with an extra Government policy against the risks of war. Surely it is worth while to do this. The cost is nothing compared with the national benefits to be secured.
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